Secondary home prices increased 0.62 per cent in October
Hong Kong’s lived-in home prices rose in October, according to official data, arresting a five-month decline following an interest-rate cut and eased mortgage rules unveiled by Chief Executive John Lee Ka-chiu.
Analysts believe the most challenging phase for Hong Kong’s housing market has passed and residential prices are expected to stabilise in the near term. However, any meaningful improvement in prices is unlikely to occur until next year, specifically in the second half.
Secondary home prices increased 0.62 per cent to a reading of 290.1 in October from 288.3 in September, according to data from the Rating and Valuation Department.
The latest reading on home prices covers the first full month following the interest-rate cut by the Hong Kong Monetary Authority in September, but only partially reflects the eased of mortgage financing requirements, which included raising the loan borrowing limit and increasing the debt servicing ratio to 50 per cent from 40 per cent for all properties.
Still, home prices are down by about 7 per cent so far this year. From their all-time high in September 2021, home prices have declined by more than a quarter.
Meanwhile, home rents retreated by 0.3 per cent, their first decline since February.
Rents have been on an general upward trend since May last year and were just four points shy of the 200.1 peak recorded in September 2019. So far this year, home rents have risen by about 4.8 per cent.
Martin Wong, the senior director and head of research and consultancy for Greater China at Knight Frank, said home prices could reach their lowest point in the fourth quarter.
“If the United States continues its current trajectory of interest rate cuts, we expect property prices to rebound by approximately 5 per cent next year,” Wong said. He added that home prices have already declined by 6.8 per cent this year.
Goldman Sachs predicts the Federal Reserve will implement quarter-point cuts in December, January and March before tapering to a terminal rate range of 3.25 to 3.5 per cent from the current 4.5 to 4.75 per cent. However, Goldman’s report, released on November 26, highlights the possibility that the Federal Open Market Committee may slow its pace of cuts sooner than expected.
Will Chu, a senior research analyst for Hong Kong and China property at CGS International Securities, expects secondary home prices to move sideways toward the end of this year before improving in 2025, thanks to additional prime rate cuts.
Wong also said sales of new homes are likely to outperform those of second-hand properties, but he raised concern over high inventory levels.
“Given the current inventory situation, I believe developers will offer more discounts and flexible financial plans to attract buyers when launching new projects,” he said.
However, Eddie Kwok, executive director of CBRE Hong Kong’s valuation and advisory services, said developers have been reducing their price cuts as transactions increased.
“We foresee the residential price bottoming out in the near term,” said Kwok.
“With end users and investors resurfacing and shopping for suitable assets, both primary and secondary residential prices may experience rebounds to varying degrees,” he said.
But prices for older residential units will continue to drop as there are plenty of new properties on the market, he said.
On residential rent, there may be a short-term correction as the end of the year is usually a low season, though the magnitude is likely to be mild, Kwok said.